As to operation and effect of endorsement to pass title, see Thomas v. Wash 1 Mo. 665; Brady v. Chandler, 31 Mo. 28; McLeod v. Snyder, 110 Mo.298, 19 S. W. 494. See Sec. 994.

Sec. 838. Holder in due course.-A holder in due course is a holder who has taken the instrument under the following conditions: (1) That it is complete and regular upon its face; (2) that he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (3) that he took it in good faith and for value; (4) that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. (R. S. 1909, § 10022.)

Holder in due course.-Section cited and applied. Long v. Mason, 273 Mo 266, 171 S. W. 567. Section cited and applied. Bathgate v. Bank, 199 A. 583 205 S. W. 875. Held, a bank holding a certified check on which payment is stopped has the right to have contending claimants to the fund, litigate and judicially determine who is rightfuly entitled thereto. An indorsee cannot shut his eyes to things apparent on the face of the instrument and secure security on the mere assertion that he did not know. Bank v. Helmbacher, 199 A. 173, 205 S W. 875. The holder of a negotiable note, indorsed in blank before it is due by the payee, is prima facie the owner of it, and is presumed to hold it in good faith and without notice. u Miller v. Bank, 193 A. 498, 186 S. W. 547.

A note taken before maturity for a pre-existing debt is taken in due course. Langford v. Varner, 65 A. 370; Fitzgerald v. Barker, 96 Mo. 661, 10 S. W. 45.

A note taken as collateral security for a debt then created and without notice of equities, is held for value. Lee v. Turner, 89 Mo. 489, 14 S. W. 505. But the rule is otherwise in case of note taken as collateral security for a pre-existing debt. Leowen v. Forsee, 137 Mo. 29, 38 S. W. 712.

As to constructive notice and facts sufficient to put taker of note on inquiry. Leavitt v. Taylor, 163 Mo. 158, 63 S. W. 385; Edwards v. Thomas, 66 Mo. 468, First State Bank v. Hammond, 104 A. 403, 79 S. W. 493; Borgess Inv. Co. v. Vette, 142 Mo. 560, 44 S. W. 754.

272.

Effect of actual notice of defenses.

Studebaker Mfg. Co. v. Dickson, 70 Mo.

As to what notice may be implied from relation of the parties. Merchants Nat'l Bank v. Lovitt, 114 Mo. 519, 21 S. W. 825; Benton v. Bank, 122 Mo. 332, 26 S. W. 975.

Section cited and construed. Greisser v. Emmons, 178 A. 28, 161 S. W. 63. Where a person who indorsed a stolen check to accommodate the thief, the check being more than thirty days old, was the holder in due course, held in error to treat as a question of fact under the circumstances involved. Where a check payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed one in due course. Id.

Sec. 839. Holder when not in due course. Where an instrument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due course. (R. S. 1909, § 10023.)

Sec. 840. Effect of notice of inflrmity.—Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount theretofore paid by him. (R. S. 1909, § 10024.)

S

Section cited and applied. Jones v. Bank, 144 A. 428, 128 S. W. 829. In the issues involved under this, and the following sections, plaintiff was entitled to take the judgment of the jury. This section, and also preceding sections, simply put in statutory form the rule of the common law as previously interpreted by many courts. Link v. Joelson, 158 A. 63, 139 S. W. 588.

Sec. 841. Title, when defective. The title of a person who negotiates an instrument is defective within the meaning of this chapter when he obtained the instrument, or any signature thereto, by fraud, duress or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. (R. S. 1909, § 10025.)

See notes to preceding section. Plaintiff bank was the holder of a note in due course, which had been given by a purchaser of a saloon, including a license as a part of the price; heid, entitled to recover, the bank being a bona fide purchaser, although a saloon license was not assignable and that part of the consideration was illegal. Bank v. Reed, 192 A. 344, 180 S. W. 1002. Section cited and applied, and held the failure of consideration does not place the burden on holder to prove himself the holder in due course. Bank v. Wood, 189 Mo. 62, 173 S. W. 1093.

Sec. 842. What constitutes notice of infirmity. To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith. (R. S. 1909, § 10026.)

Section cited and applied, and held, if an indorsee had actual knowledge at the time of taking note that the place of payment had been removed or changed, he cannot be "the holder in due course." Bank v. Helmbacher, 199 A. 173, 201 S. W. 383. Where a title of a negotiable promissory note is defective, the burden is upon the holder to show that he took the note in good faith for value and without any notice of defect in title. Miller v. Bank, 193 A. 498, 186 S. W. 547.

Sec. 843. Holder in due course may enforce payment.-A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. (R. S. 1909, § 10027.)

Right of bona fide purchaser.-Section cited and applied. Bank v. Reed, 192 A. 344, 180 S. W. 1002. Where a part of the consideration for a note was illegal, held bank being bona fide purchaser, entitled to recover. The payee of a negotiable note is not the holder in due course, the instrument not having been negotiated to him. Distinction drawn between the holder and the holder in due course. Long v. Shafer, 185 A. 641, 170 S. W. 690.

As to title and rights of bona fide purchasers, see Kuch v. Cornett, 79 A. 574; Allen v. Harris, 79 A. 490; Neuhoff v. O'Reilly, 93 Mo. 164, 6 S. W. 78. One purchasing from a bona fide holder acquires his title. First Nat'l Bank v. Stanley, 46 A. 440. As to defenses available against bona fide purchasers, see Neuhoff v. O'Reilly, 93 Mo. 164, 6 S. W. 78; Comings v. Leedy, 114 Mo. 454, 21 S. W. 804; Famous Shoe etc. Co. v. Crosswhite, 124 Mo. 34, 27 S. W. 397.

Sec. 844. Holders, other than in due course. In the hands of any holder other than the holder in due course, a negotiable instrument is subject to the same defenses as if it was non-negotiable.

But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter. (R. S. 1909, § 10028.)

Purchasers after maturity. See notes to preceding section. Distinction drawn between the holder and the holder in due course. Long v. Shafer, 185 A. 641, 171 S. W. 690. Certain facts examined and held not to constitute appellant "holder in due course." Long v. Mason, 273 Mo. 366, 200 S. W. 1062. Where one of the makers to a promissory note negotiated it after maturity the transferee takes it under this section subject to the defenses though it was used for a purpose other than the one for which the accommodation maker signed it. Schlamp v. Manewel, 196 A. 114, 190 S. W. 658. As to defenses against purchasers after maturity, see Kelly v. Staed, 136 Mo. 430, 37 S. W. 1110; Williams v. Baker, 100 A. 284, 73 S. W. 339.

Sec. 845. Burden of proof on holder when defective title is shown. Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. But the last mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title. (R. S. 1909, § 10029.)

Section cited and applied, and held, where a defendant pleads payment of a note or other obligation, the burden is upon him to prove payment and that burden is not shifted by any presumption. Brannock v. Jaynes, 197 A. 150, 193 S. W. 51, Where the title of a negotiable promissory note is defective, the burden is upon the holder to show that he took the note in good faith, for value, without any notice of defect of title. Miller v. Bank, 193 A. 498, 186 S. W. 547. Under this section, and also Sec. 838, the failure of consideration does not place the burden on the holder to prove himself the holder in due course. Polk v. Wood, 189 A. 62, 173 S. W. 1093.

Sec. 846. Liability of maker. The maker of a negotiable. instrument, by making it, engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse. (R. S. 1909, § 10030.)

Section cited and applied. Long v. Mason, 273 Mo. 266, 173 S. W. 1093; evidence held admissible to show relationship between accommodation makers and makers, in order that the former might assert their equities under the law of subrogation. The change of the place of payment or the addition of a place, when no place is specified, and the removal of the place of payment, under the facts, defeated recovery. Bank v. Helmbacher, 199 A. 173, 201 S. W. 383.

As to when maker is estopped to deny competency or rights of payee, see St. Joseph Fire and Marine Ins. Co. v. Hauck, 71 Mo. 465; First Nat'l Bank v. Gillilan, 72 Mo. 77.

Sec. 847. Liability of drawer. The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or

to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder. (R. S.) 1909, § 10031.)

Section cited and applied, and held the death of a drawer of a check operates as a revocation of the payee's authority. Fisher v. Bognell, 194 A. 581, 186 S. W. 1097.

Sec. 848. The acceptor. The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance, and admits: (1) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and (2) the existence of the payee and his capacity to indorse. (R. S. 1909, § 10032.)

Under this section the bank which pays the check drawn on it, or one who receives the check in due course in good faith is precluded from disputing the genuineness of the drawer's signature. McClendon v. Bank, 188 A. 417, 174 S. W. 203. The payment of a check or bill of exchange by the drawee is equivalent to its acceptances. Bank v. Bank, 148 A. 1, 129 S. W. 57.

Sec. 849. Indorser's liability.-A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity. (R. S. 1909, § 10033.)

One who places his signature on a note otherwise than its maker, drawer or acceptor is deemed an indorser, unless he clearly indicates to be bound in some other capacity. Eaves v. Keeton, 196 A. 424, 193 S. W. 629. Under this section a person who placed his signature upon a promissory note held an indorser. Hanlon, 183 A. 243, 166 S. W. 830.

Sec. 850. Persons signing in blank before delivery.

Bank v.

Where

a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser in accordance with the following rules: (1) If the instrument is payable to the order of a third, he is liable to the payee and to all subsequent parties; (2) if the instrument is payable to the order of the maker, or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer; (3) if he signs for the accommodation of the payee, he is liable to all parties subsequent to thepayee. (R. S. 1909, § 10034.)

As to liability of endorser as original promisor, see Siemans and Halske Elec. Co. v. Ten Broek, 97 A. 173, 70 S. W. 1092; Oexner v. Loehr, 106 A. 412, 80 S. W. 690; Herrick v. Edwards, 106 A. 633, 81 S. W. 466.

One who indorses a negotiable promissory note in blank, not being a payee or endorsee thereof, is prima facie deemed a maker, yet this rule is not applicable where the note is made payable to order of drawer. First Nat'l Bank, v. Payne, 111 Mo. 291, 20 S. W. 41.

An indorser after delivery to the payee is liable as guarantor. Corbyn v. Brokmeyer, 84 A. 649.

Sec. 851. Liability of persons negotiating. Every person negotiating an instrument by delivery or by qualified indorse

ments warrants: (1) That the instrument is genuine and in all respects what it purports to be; (2) that he has a good title to it; (3) that all prior parties had capacity to contract; (4) that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless. But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee. The provisions of subdivision three of this section do not apply to persons negotiating public or corporate securities, other than bills or notes. (R. S. 1909, § 10035.)

Section cited and applied and held a promissory note, negotiable in form, does not lose its negotiable quality by becoming overdue, but indorsing it after due, it becomes a new bill at sight. Hawkins v. West, 167 A. 439, 151 S. W. 789.

The vendor of a bill or note is responsible for its genuineness, although not endorsed by him, and if the signatures of the parties thereto are forgeries, the consideration fails. Thompson v. McCullough, 31 Mo. 224.

Sec. 852. Indorsers without qualification.-Every indorser who indorses without qualification warrants to all subsequent holders in due course: (1) The matters and things mentioned in subdivisions one, two and three of the next preceding section; and (2) that the instrument is at the time of his indorsement valid and subsisting. And, in addition, he engages that on due presentment it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. (R. S. 1909, § 10036.)

Warranty.—The liability of an endorser of negotiable paper is secondary, and, as a general rule, contingent upon the exercise of due diligence by the holder in demanding payment of the maker, and giving notice of dishonor to the indorser. There are exceptional cases excusing demand and notice, but mere insolvency of maker or acceptor not sufficient. Jamison v. Copher, 35 Mo. 483. See Sec. 856.

Sec. 853. Indorsement of instruments negotiable by delivery. Where a person places his indorsement on an instrument negotiable by delivery, he incurs all the liabilities of an indorser. (R. S. 1909, § 10037.)

Sec. 854. Indorsers when liable in the order in which they indorse. As respects one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to to show that as between or among themselves they have agreed otherwise. Joint payees Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally. (R. S. 1909, § 10038.)

Indorsers, in respect to one another, are prima facie liable in the order in which they indorsed, but evidence admissible to show that they have agreed otherwise among themselves. Eaves v. Keeton, 196 A. 424, 193 S. W. 629.

Sec. 855. Liability of brokers. Where a broker or other agent negotiates an instrument without indorsement, he incurs